unprecedented, i think. but i do think that momentum and unification has broken down since march. you've seen countries going their different ways. egyptians are consumed with egyptian politics, tunisians are consumed with tunisian politics. there's still this sense of a common arab identity and this common arab story, but it's not nearly as intense at the -- it's not manifesting in quite the same way now. the other part of it is that bad things spread as well as good things. there's much more sectarianism now coming out of syria and bahrain. saw a survey showing there's higher numbers of egyptians who say shia shouldn't be considered real muslims than there are in iraq, and iraq just went through a sectarian civil war, and most egyptians have probably never seen a shia in their life. so sectarianism, those kinds of things, are also being spread through, through these media

channels. >> yeah. i think on, you know, the unification issue, um, i agree that there's diversity, and you will find, you know, libya, tunisia, everywhere else will be focused on issues. only about a third across the board identify with this state as the first choice of identity. and most still identify themselves either muslim or arab first. really it's muslim arab. so you've got, in essence, you know, when you even ask them should the state serve the interests of its citizens or the interest of arabs or muslims, you have a large chunk saying the interest of arabs and muslims, so there is a sense of connectedness even as they focus on the issue. but politically, we're focused on public opinion, this is a revolutionary time, but we haven't focused on the states because it's been a very

fascinating story. egypt is still going through a revolution, halt asserted -- hasn't asserted itself, needs help from the rest of the world particularly economically. it can't be as assertive and play a role. iraq is not really fully integrated into the arab world left. what does that leave? syria is in trouble. that leaves the gulf cooperate council state led by saudi arabia. so what we have now is a coalition state, the gulf cooperation council around saudi arabia that invited two other states into the royal club, jordan and morocco, to broaden the gcc in exchange for economic and security cooperation going in different directions, and that is the coalition right now that is the powerful coalition in the arab world. and the states that are going through change are somewhat marginalized, there's no one else is so if you want to call that unity, go ahead.

that's what we have. >> that's a problem. egypt will come back. >> it'll come back. >> and soon. >> and then in terms of identity politics, you get to a country like libya, you add the tribal -- >> exactly. i mean, i think there's two things going on somewhat paradoxically, at the same time there was a rise in arab identity. there's also within country divisions that are continuing. so i think it's really important not to overstate how they come together. i mean, i was in egypt last august during ramadan with my family, and it was almost like a soap opera, you know? talking about watching al-jazeera, and there was this fever that people couldn't wait to see these places liberated. that has died down since, and people are having to deal with the on the ground issues that are facing them in their cities. and i think you've got those going on at the same time, and it's important not to overgeneralize the pan-arab identity as the sectarianism as

mark mentioned. >> we have three extraordinary professors who have given us arab awaking 101, 201 and 301. >> next, steve ratner talks about addressing the fiscal cliff. of he was joined by the state department's chief economist at the world affairs council to talk about president obama's second term and policy changes ahead. this is about an hour. [applause] >> thank you very much for that introduction. lori has said to me that since we started a bit late, provided it's okay with our speakers, we'll run a little built late, maybe five or ten after two. i'm going to ask them questions for about 40 minutes and then throw the floor open to you. so get your notebooks out and your questions, you can grill them in a moment. before starting, lori asked me to set the frame a little bit and to talk just for a moment

about the u.s. competitiveness and the u.s. economy in a global context. and their actually was an oecd report that came out this morning that does that admirably. this report predicts that within four years, by 2016, the chinese economy will be bigger than the economy. and what the oecd report sort of further says, it's a great report. if you're interested, take a look online. today the u.s. economy accounts for 23% of the world's economy and india is 7. in 2030, according to the oecd predictions, china will be 29% of the world economy, the u.s. will be 18 and india will be 11. and those are, i think, really worthwhile numbers to keep in our mind as we talk about u.s. competitiveness in the world economy, because we're entering this entirely new era where the u.s. is going to be a big player

in the world economy but no longer the preeminent, the very largest one, and i think that brings real challenges and requires a whole new way of thinking. so my opening remarks, steve was introduced, i think quite rightly, as a guy who i hope is getting cases of champagne and bouquets of flowers from the white house. because on certain readings you could say, you know, he's the guy who got the president reelected. that means, i believe, he has great insight into what obama's second term economic policy will be -- [laughter] and the big question on the agenda which i think certainly already tremendous bearing on u.s., on the u.s. domestic economy and, therefore, u.s. global competitiveness is the fiscal cliff. so, steve, paul krugman advised the president this morning to just say no.

what's the president going to do? >> let me get my phone out, and i'll find out for you. [laughter] i do find it amusing that whatever you and the previous speaker said of me, everybody laughed. so i don't know what that says about my credibility. um, i don't know what the president's going to do. i guess he's speaking at 1:30, heidi and i were discussing it before, and we'll get some tone from where he's coming from. i would simply say i disagree with paul krugman. i think it's great the president won. i think he got a mandate. i think the country's spoken in terms of what kinds of fiscal policies it wallets. there was a lot -- wants. there was a lot of commentary during the election about how neither candidate put forth a clear policy agenda for the coming years, and there's some truth to that, but they both made clear the outlines of their policies, including fiscal policy. the balance between tax increases and spending to the achieve fiscal balance, who

would bear the burden of it, and so on. so i think the president is quite right to say he won, mitt romney lost, and, therefore, his vision for what fiscal policy should be which is that it's going -- that solving our fiscal problem's going to require both revenue increases and spending increases, that it's okay to have -- spending decreases, excuse me, that it's okay to have spending decreases or holding down the rate of growth more accurately be the bigger part of the package than what you do on the revenue side but the revenues have to be a part of it, and those revenues should come heavily from those who can afford to contribute to them. the people who makeover $250,000. so i think the president is right to insist on those principles, but we also have to remember the republicans control the house, they have a blocking position in the senate, and the most important thing is not just to avoid the cliff. we could avoid the cliff by simply kicking the can down the road, we'll extend everything,

the cliff goes away. but nobody, i think, wants to do that, which is why this has become so important. and i think in order to get a resolution that really does address in a very fundamental way our fiscal outlook, you need to have compromise by both sides. we need something that looks like simpson-bowles, something that involves about $4 trillion of savings over the next ten years and something that would, most importantly, address entitlements which have to be on the table and stabilize the rate of growth of debt to gdp. we've gone over 70% now, it was 65% a few years ago. that's the right metric we should be looking at for a successful budget deal, one that would stabilize that roughly at its current level. >> so the last time the president tried to reach this kind of compromise you're describing, steve, he didn't seem to find a lot of give at the other side of the table. is that going to change in. >> first of all, there are different interpretations or different reports as to what each side was willing to do.

i think as i understand what happened, um, about, what, 13, 14 months ago, the summer of '11, there were a lot of unfortunate, almost nonserendipitous things that happened that just got it off track when they were, in fact, very close. no, i think boehner has been very clear. i think rev news are -- revenues are on the table. life's filled with compromises, we'll see where that goes. so, no, last time, you're right, it didn't work. we weren't facing quite the same set of circumstances we're facing today, and so i'm cautiously optimistic, although i will also just say lastly that people sometimes say, okay, there's either a deal that looks like simpson-bowles or we go off the cliff. we could end up with all kinds of outcomes that may be less than i would like, maybe less that all of you would like or at least something. i'm hoping it's more over here. but i don't know. >> and, steve, so we are

gathered here to talk about u.s. global competitiveness. how important is resolving these issues to the american position in the global economy? >> well, first of all, i think it's important not just to our position in the global economy, but our position in the world. admiral mullen who is the previous chairman of the joint chiefs of staff said our greatest national security threat was our lack of fiscal resources and the state of our economy. i'm not a foreign policy guy or a strategic guy, but that seems, obviously, right to me. if you can't aboard the kind of military you need to project power, if you can't afford to fund the state department in the kinds of ways it should be doing, no matter how many people we have or how wealthy some of our citizens are. i don't worry, if you don't mind my digressing slightly, i don't worry about china being a bigger economy than we are. i don't honestly care how big

china is. they do have three-and-a-half times more people than we do. i'm more concerned with how big we are -- >> how big or how rich? >> well, i put them in the same -- rich being gdp. how successful are we economically. um, and so i do think it is, i think resolving the fiscal thing is of essential importance to our business community in terms of deciding how much they're going to spend, where they're going to invest, how many people they're going to hire and, therefore, to our position in the world. not just the problem of our debt and deficit, but unless we, unless we create some certainty in washington, i've become convinced -- i'm a little skeptical about what business people say. i've been around them a long time, and they're always whining and complaining about something. [laughter] but i do think in this case they have a point. you know, the single -- second biggest drop in consumer confidence in this country

occurred when we have the debt ceiling drama. not 9/11, i think katrina was the biggest, but the second biggest in the last four years was that event in terms of consumer confidence dropping. government, i think government right now, frankly, has been part of the problem, not part of the solution. it needs to provide, and, you know, almost regardless of what it does, it needs to provide some certainty and predictable to businesses and consumers so that they will function better and we will have a more productive economy. >> okay. so, heidi, steve has provided a very nice lead-in to bringing you into the conversation, and he said, you know, look, the u.s., the strength of the u.s. domestic economy, sorting out the fiscal situation is important not just for the u.s. and the world economy, but for the u.s. and the world full stop. >> right. >> you work at the state d., -- department, but you're the chief economist. what do you do? >> now they're laughing at her. [laughter] >> well, the role of the chief economist largely came out of

a -- >> louder. >> your mic's not transmitting. >> keep on talking and -- >> the idea to create the idea -- >> [inaudible] >> i think -- >> we'll get some technical help. >> yep. >> you know, try it closer to it's working, it's just not catching your voice. >> the role of the chief economist came out largely of this idea -- [laughter] that economics strives a lot of what's happening in our foreign policy and --

>> is that, can people here? no. >> one more second. try now. >> okay? >> there we go. >> oh! [applause] >> so i'll start again. the role of the chief economist came largely out of the understanding that economics is driving many of our foreign policy issues right now. a lot of people go back to the 2009 statement that admiral mullen made about the fact that the debt and the deficit were, are a leading national security concern. many others have been looking at this issue of a very shifting set of tectonic plates out there where we see countries rising in power largely on the backs of their economies, and in order to understand that, um, and really change the way we work on our foreign policy issues, we have to understand how that affects the way that other countries are interacting with us.

secretary clinton has embarked on a massive campaign within the state department called economic state craft of which this office is part, and it's -- there are two main pillars of it. the first is one that the state department needs to be part of domestic economic renewal. so we have over 200 embassies boots on the ground, and that we need to be using those embassies much more effectively to support national export initiatives, to do something that is very different for the state department which is look at ways to attract inbound foreign direct investment which is, um, as a country you're looking at areas of competitiveness. it's really, it brings home to roost a lot of the questions that i think you've been discussing the past, the past two days about education, about infrastructure, tax, regulatory. all the issues that are wound up in, um, in our own competitiveness or what foreign

investors look at when they want to invest in the u.s. or canada or any place in the world. so our embassies are very much focused on the commercial diplomacy aspect from the ambassadors on down. the second part of it is really a much, a much softer, nuanced approach which is how do we use tools and think differently about the way economics is shaping foreign policy? and that is something that the secretary's done an enormous amount of deep thinking on. we're looking at ways that we train foreign service officers, the types of things that we want them to engage with on longer term strategic issues, rise of the global middle class, what that's going to mean for the way we engage bilaterally, multilaterally, all sorts of issues that are wrapped up in the how economics drive foreign policy. state capital is another very good example, and it's something we spent a lot of time thinking about. >> so i'd like to ask a follow

up precise lis about state -- precisely about state capitalism. you've talked about this original idea of creating an agenda of economic state craft, bringing it to the center of foreign policy, but you are engaging with countries for whom doing that is much simplerlike china, like russia, the state capital company where, you know, your company is your arm not only of foreign economic policy, but of foreign policy full stop. how do you operate in a world with players who are operating under these very different rules? >> well, it's something we do spend quite a bit of time thinking about this. it's not all about china. there are issues with other countries like -- >> russia? >> -- like russia, but not just those two. and the lines are really blurred in terms of where the state ends and where capital and corporate interests begin for many countries. at the state department, we've really tried to create

mechanisms through multilateral institutions like the oecd has come up with a platform for competitive neutrality which looks at the different ways that governments can act to subsidize or to give favor to their own state-owned or state-led interests and provide some recommendations for engaging in a platform of competitive neutrality. it's a different way of thinking about the challenges, and it's something that, you know, it's not just the u.s. that's concerned about, we have a lot of other countries out there that are similarly looking at rising powers who are, um, who are using tools that we don't necessarily have at our behest. the other thing is that we're working very closely with u.s. companies. we've had a lot, a lot more outreach over the past couple years than i think we've ever really had at the state d. in terms of engaging with large,

medium and small companies who are facing challenges and want to work together, um, in partnership with the government. >> and do you think that effort has to be even more aggressive? i've certainly heard from u.s. companies a comparison, say, with angela merkel and the point made that when she travels abroad, she has a planeload of german ceos who come with her, they get out of the plane, and she tries to do deals with them. should we see more of that approach not just from the state department, but from the white house? >> so we are doing that a lot. deputy secretary new nyes just a delegation to egypt, we've been holding lots of conferencings around u.s. infrastructure in particular and how we can help support companies with the passive investment going -- massive investment going into infrastructure in many countries around the world. there are areas where we've been focused. it's a work in progress, and i think it's something that we'll

continue. >> steve, you were nodding your head as heidi was saying that. do you need -- do you think there should be a more aggressive government support for u.s. global champions? >> well, heidi knows more about this, but i was nodding my head about the angela merkel anecdote because it is something you hear from business people all the time. >> does it fall in the whiny category -- [laughter] >> i think heidi has essentially agreed that they have some legitimacy to their views and, hopefully, now things are moving in the right direction to a greater degree. but, you know, we do face -- there is, there's always competition among governments, and other governments are always going to be prepared, some of them, certainly, are going to be prepared to do more to help companies than we are going to simply by the nature of what's appropriate and what's not. you can get in export subsidies, all kinds of non-economic

foreign policy where we may want to be taking a tougher stand for human rights, whatever, than other countries feel they need to do, and then their business community benefits from those kinds of policies. but -- and that's where it gets into whining because, you know, we have to live within our principles and do it our way and continue to be a little more effective. >> i'd like to sort of challenge you both a little bit on this idea of government championing companies, and what i'd like to ask you particularly to reflect on is how easy is it nowadays to define a u.s. company? and, you know, so many companies now are truly global, you know? chrysler, chrysler fiat, is that italian -- [inaudible] we canadians like to think canadian. they have operations around the world. they're seeking markets around the world. they're seeking to move their r&d around the world. so what does it mean to actually have government, national government be a champion of a multi-national company? >> so as soon as i said what i

said before you even said what you said, i said to myself that was really stupid because these companies are multi-national. [laughter] and, you know, you have to recognize that. so i'll talk about it from the perspective of the auto industry for a second because, you know, you were nice, and loss of people were very nice, the president saved this industry, safed particularly these two great american companies. but what does it mean to save an american company? you know, a company's just a company. it's something with a certificate of corporation. the real question is he saved the jobs. you could make an argument from our point of view the president and people in the state department should spend as much or more time trying to get other companies to bring jobs here. and so that is an important, a really important distinction. and when you look at the auto industry, what i have said to

people is, yeah, we saved two great companies, but did we save the jobs? the global competitiveness, if you wallet to segway into that subject for a second, the global competitiveness will increasingly spill intofulses, and -- into services, and it's real. i spent most of my career working with media and telecoms companies, i was not a manufacturing guy, and so when i started getting involved with autos, it really opened my eyes to the competitive issues we face in manufacturing. so i'll give you a bunch of statistics, if you want, that'll maybe help frame this. general motors, i think, when we showed up there had 85,000 jobs, and by the time the restructuring was done, it was down to 55,000 jobs. we had to do some amputation to save the patient, we had the to make it competitive. but in mexico general motors' head count is up over the past four years, and certainly in other parts of the world as well. because general motors has to

compete globally, and, therefore, it has to be willing to source its labor wherever it is most cost effective. when, in 2009 the cost of a traditional general motors worker was $28 of cash compensation and roughly the same amount of benefits, so $55 an hour. that was actually after the restructuring was over, 60 before. in mexico, general motors paid $7 an hour total comp, in china $4.50, in india, $4. same company. and the productivity in mexico today is at least as high as it is in the u.s., some gm people would tell you higher. productivity in china is certainly higher, i've been to shanghai, it looks exactly like the plant in michigan. they don't export here at the moment, but that may change someday. so what you see happening is this relentless pressure on our wages because if we want the save the job -- it's really this huge conundrum which is that we can save the jobs, but at what price in and the price is wages.

so today when general motor hires most of its new workers, they get paid $15 an hour plus or minus, about the same in benefits, that's $30,000 a year. those are not great middle class jobs, those are lower middle class jobs at best. volkswagen opened a big plant in chattanooga a couple years ago, 2,000 jobs. their first plant in the u.s. since pennsylvania 30 years ago that didn't work out perfectly. and they got a luge number of -- huge number of incentives from the state and the city to come here. big celebration. huge number of applications for these 2,000 jobs. every one of those 2,000 jobs started at $14.50 an hour. they've since gone up a little bit from there. so the kind of dirty little secret about that plant is that in part volkswagen came here because we were the low cost labor provider compared to germany, and they could build cars more cheaply than in

germany. that is something i don't have -- we can talk about education, training all these thing, i don't have a silver bullet by any stretch of the imagination, but it is one of the two or three things about our whole economic pick think that -- picture that i most worry about. >> i want to push you a little bit because, you know, the painful way to summarize what you've just said is the way you can save great u.s. companies and u.s. jobs is by hollowing out the middle class. and it's not necessary hi a question of -- necessarily a question of structural unemployment, but it is a question of structural, you know, working poor. is that the future for america? >> that's certainly the path we're on at the moment. when you look at the, at incomes and what's happened in this country to incomes, you know, median family incomes in real terms are 7% lower now than they were in 2000. in the 2005 so-called recovery, they never got back to where they were in twoa, the first

time that's happened. they're still going down even in this economic recovery. in ohio, where i went on behalf of the president toward the end of the campaign, the job situation's very good, unemployment's 7%, but the incomes which used to be at the national average are now materially below, and new people get hired at a much lower rate. so that's exactly what we're headed, and the question is do we have the national will to implement that solution? i think the solution -- this falls into the, this could be considered falling into the apple pie kind of category because everybody says, yeah, that's what we should do, but i don't have a better idea, what we've done reasonably successfullifully for 250 years is to move our economy toward the new jobs that require higher skill levels, higher intellectual content and, therefore, we can be more competitive and pay better. so if you look around and say what industries are we world leaders in, i.t., media, certain

high-skilled manufacturing like airplanes, and we're world leaders in financial services. and this may sound like me promoting my own industry, but i think we should be encouraging financial services, not trying to tear it apart. so, you know, the solution is, clearly, more education, more training. i don't believe, and i'll give you the shorthand, we can talk more about it, i don't believe government should try to pick winners and get deeply into industrial policy, but certainly to provide an environment which business can operate profitably with certainty, with predictability and with the flexibility it needs and then try to attract the industries of the future. that is, you know, it may sound like a pat set of prescriptions, but it's the best idea we have. i don't know, as i said, if we have the national will to implement it. and even if we did, it's a long, long, slow process. but i don't see the alternative. i don't think closing our borders is an alternative, i don't think mandating wages that

are uncompetitive is a solution. i don't have a better idea. >> heidi, a better idea or do you want to endorse steve's -- >> where you started which was with the foreign direct investment and what we should be looking to do is try to attract further foreign direct investment. foreign-owned companies already provide about five million jobs in the u.s., and they tend to, your story aside, tend to be fairly high-paying jobs, relatively high-paying jobs. today tend to be more weighted towards the manufacturing sector, and so to the extent that we haven't really on a national scale or at least at the federal government level come up with a systematic way of trying to promote ourselves, um, as a destination for inbound investment, and there's certainly a lot of reasons beyond the cost of labor that companies look to invest here

and that has to do with, um, education level, it has to do with challenges aside, we have some of the, the top educational institutions in the world. we have the, um, legal system that protects investors' rights, we have intellectual property rights that are very robust. and so there are other reasons that companies look to invest in the u.s., and that's something that i think we are trying to encourage around the world. and then the other, the other -- the title of this is both challenges and opportunities, and i think you laid out some of the challenges very, very well. one of the great opportunities, and i think we really don't know what the scale or scope will be, but with shale gas, um, and what we might see in the coming decades as a result of abundant, low-cost energy supplies, that can have a dramatic impact on

what we might see in terms of being able to proceed with a manufacturing, um, and manufacturing continuation of employment here that is not just dependent on what we hold sacrosanct which is our, you know, our innovation, our high-tech and service industries which we should very much be supporting. but at the end of the day, we want to have a balanced economy as well, and i think that's something to work on. >> i'm glad you mentioned, heidi, because i was getting very depressed talking about the hollowing out of the middle class. i think it's the single biggest issue if america today and hard -- in america today and hard to see a clear answer, but maybe energy is going to be part of the solution. steve, do you agree? >> i do agree, and i wish i had thought to include that. slightly more on optimistic, because heidi is completely right. it is a great thing that is happening to us in terms of availability of particularly low-cost natural gas. it's not a worldwide commodity

which means if you have as much of it as we have at the moment, the price is low relative to the cost of oil at a btu basis, and, therefore, we can attract manufacturing -- energy-intensive manufacturing, and it's already starting to happen in north dakota, to eastern ohio, wherever to take advantage of it. and that is a, you know, a great thing. and i don't want to minimize it, but, um, and i don't even know the calculation exactly, but you'd have the say to yourself, okay, so a company is saving this much on its energy, how much can it afford to pay its workers and still be competitive globally? you may have higher cost energy paying people a lot less. so i think it's a great thing, but i just want to also be, i guess, a little more cold-eyed about it in terms of how far it takes us. i think realistically manufacturing is going to decline as a hair of our economy just -- as a share of our economy just as agriculture has even though we are still the

world's largest food exporter, i believe. but it'd be nice to get the number of jobs to start going up in a more sustainable way. >> i totally agree with that, yeah. >> i'm going to make a positive energy point to you, steve, and then ask a positive question. the positive point is when it comes to actual extraction, those are high-paying jobs, because you can't outsource them. so i think that's one area where you are actually seeing wages going up. having said that, if energy -- do you worry this is going to become a devisive issue in your party? because there is a wing of the democratic party that is pretty anti-fossil fuel per se and is not greeting the discovery of these new sources of fossil fuels -- natural gas not so bad, but there's oil that's being found, too, some of the neck anemics for extracting it like fracking are not an environmentalist's favorite thing. so is, are we going to start to see some tension within the democratic party between the people who are welcoming this as

a source of jobs and economic growth and the environmental wing of the party that says, oh, no, we want to get away from fossil fuels? >>? >> well, i don't have any particular insight. your fess is as good as mine. i guess i would say a couple things. first of all, the environmentalists have taken a very sharp -- including my boss, mayor bloomberg -- have taken a sharp aim at coal and have succeeded in reducing coal's reach in our picture. that is the most worrisome from an environmental point of view. then you get to oil which has some set of issues, but, you know, gas is much more -- put aside the ec traction, the -- extraction. the use of gas, it is much more environmentally friendly than any other kind of fossil fuel, so i think as you said focus on the extraction side of it. i would say at the moment my sense is that the country, including most democrats, are

more focused on our economic problems. our environmental problems are serious and real, and we can talk about sandy and all that, but there's no question -- and i'm certainly a global warming worrier and one who -- >> do you believe it's happening? >> well, i don't know how you can't. >> >> just asking, just asking. [applause] >> sandy is, like, okay, fine, we had that. but there's every other piece of evidence is just so overwhelming, you know? you and i were talking at lunch about how you have to look at the numbers and take the numbers as numbers, and these are numbers. whether it's temperatures, sea levels or any of that stuff. so you can't not believe it. but i do think -- [laughter] i don't think hardly anybody believes that we're not having global warming, right? is there anybody? >> a few. there are a few people who still say that. >> but, look, i do think everything -- these are balances, right? we can have a zero tolerance policy on any damage, and we'll have in economy and no jobs, just sort of let everybody run wild, and we'll all be

underwater and unable to priest or something -- unable to breathe, and i think right now we're at a pretty good balance in terms of people's awareness and concern about the climate issues but still allowing these new sources of energy to go forward. and i do think with unemployment at 7.9% and all the economic issues we talked about, i do believe that with a lot of controls and whatever these new energy sources are going to continue to be developed, and i think that's a good thing. >> okay. i'm going to ask heidi to make a final comment on the environment and then throw it open to everybody here, so get your questions ready. okay. so, heidi, the environment clearly a global challenge, clearly part of foreign policy, how does it fit into economic state craft? >> well, it fits into a lot of different things that the state department's working on, what we as a relatively new office, um, of seven months and only a few people have been working on are much more of the sort of geographic priorities that the

secretary has highlighted. so i probably wouldn't be the best person to speak to the state department's view on a whole host of environmental issues. i spend a lot more time on the eurozone, on tunisia and egypt, on the u.s./china relationship, the pivot to asia. i mean, there's sort of -- there's a bit of a list from an economic analysis, um, perspective that we tend to spend most of our time on. >> okay. i would like to ask you about all of those subjects, but maybe everyone else would like a chance to do that too. so, please, questions? i think there's a mic here. is there another mic? going once, if people don't have questions, i'll ask them. okay, please. >> i always wanted to be mick jagger. well, wayne lloyd, world affairs council of atlanta. one of the things that we observed both in the atlanta environment but just looking at the global companies there has

to do with our competitive advantage in collaboration, that the work that many companies are doing with government, ngos like care, world wildlife fund and so forth and with business, that triangle is very successful or it appears to be. just like some comments on is this one of the elements of our competitiveness that we ought to feature and encourage especially from the point of view of the state department and in the way that we're trying to position around the world effectively? >> well, i think one of the things that we are trying to do to deepen the partnerships that we have with the chamber of commerce, with companies and groups of companies in the. we tend to hear from many companies that other governments work much, much more closely in terms of helping provide

financing packages, um, you know, if you're looking a at an infrastructure, you tend to have other companies show up there with great big package deals of where their governments are providing feasibility study support and all sorts of other things. so i think we're, we have very good intentions, and we're making strides, but i think, you know, we need to do a lot more. so i'm glad to hear that you have a very, a good, positive experience. we want to be doing a lot more of that. >> okay, steve, do you have anything to add? is no? okay, please, ma'am. >> i'll go quickly. my name is anna, i'm from the dallas/fort worth world affairs council, and as i told everyone yesterday, i teach seniors. i've been facebooking with them, and can they ask me questions, and the point is they want to

know for this right now -- because they're online with me -- should they be optimistic? they're very scared, the class of 2013, and what can you say to them that i can pass on to them about economic competitiveness and if they should be optimistic or worried? >> great question from the seniors. okay, steve. >> notwithstanding everything i said before -- [laughter] i'm actually optimistic. i think, i'm optimistic because heidi ticked off a number of these before in a slightly different context, but they're just as applicable in this context. we have the most flexible economy in the world. we have this incredibly diverse labor force, diverse group of people in this country who come here because of the opportunity. there are not that many people who leave america to go live in all these other places that we worry about being more competitive than we are, but there's a long line of people who still want to come here, and immigration is, obviously, was a big issue in this campaign. i live in new york which has an

enormous immigrant population, and i can't even imagine what the city would be like without it in terms of the vibrancy and the excitement that you feel when you just simply walk the streets of new york. so we have a long history of finding our way through these kinds of challenges and problems, and i believe that as long as we, as long as we stick to our basic principles, and i do think we need to make some progress here in washington, i do think the government has reached a level of dysfunctionalty that is high even by government standards. i'll give you statistics -- i'll give you a number. >> okay, we love numbers. >> unless some incredible amount of lightning strikes, when this congress leaves in another few weeks, it will have passed fewer than half as many laws as any other congress in modern history. now, you may say that -- some people would say -- >> that was the point. >> right. but i don't i don't think so. i think we have a lot of

problems, and congress is paid to solve them. so i do think washington is, has to improve its success rate, shall we say. but beyond that i do think we have a lot of advantages in this country. so i do think there are reasons to be optimistic. >> okay, i have a follow up for the dallas/fort worth seniors that i'd like you to answer, also, heidi. what areas should they go into? what should they be studying? >> um, i think a lot of people talk about what they call s.t.e.m., science, technology, something and math. >> engineering. >> engineering and math, right. [laughter] you know, i do think, look, i'm all for -- you know, i have a son who's majoring in classics. i'm all for studying all these interesting things. but i do think that having those kinds of skills are what -- it's part of when you do look at the countries that we worry about competing with us, a lot of their focus is on studying those kinds of things that actually have, you know, have real world usefulness in the economy. and germany for a long time,

i've spent a reasonable amount of time in germany, has emphasized engineering and technical backgrounds, and certainly china is going it, and i'm all for -- as i said, i'm all for having historians and even economists. [laughter] economists are very important. but, or money managers. but i do think that having those kinds of, having a strong base of people with those kinds of skills is a great, would be a great thing. >> so i think that the most important point is education matters a lot. if you look at the unemployment breakdown in the u.s. right now, it's skewed very much towards less than high school graduates are sort of a range of numbers, but i think it's up around the 13, 14%. and as you get up past high school graduate, college graduate, advanced degree it just drops precipitously. and there is a gap that we have right now in the country where there are unfilled jobs that are

highly technical, um, and require a degree of education that we aren't really pushing, um, people to get at this point. so, you know, education matters a lot, i agree with the s.t.e.m. comments. my daughter's studying mandarin. [laughter] >> mandarin is useful. >> mandarin is good. >> no, but really i think looking ahead skills and talent are going to, are going to drive this country forward across a wide range of different subject areas. >> so i once at a conference similar to this i asked the high school seniors subject question, and he said statistics which my three kids are so sad that was his answer. [laughter] that's their new assignment. okay, please. >> jack segal from travers city, michigan. first of all, this is great. it's like watching --

[inaudible] without the screen. three dimensional. [laughter] i'd like to go back to the issue of sequestration and jobs because if you look at the web site, let's say, of senator levin, he justifies the large defense budget on the basis of the need for jobs. and that concerns me, that we will not get to the kind of economy that you're saying that we really have to get to if we're going to try to preserve jobs by building humvees in michigan. is there, is there a way out of this conundrum? can we work our way over the next four years out of depending on a inflated defense budget for the jobs stability? >> okay, great question. >> so i guess what -- i agree with you, i guess, up to a point anyway in the sense that it is, one of the things that government does not do, one of the many things government does not do well is distinguish between different kinds of spending and what impact they have on the economy.

the government does not keep its books in any way that resembles the way companies keep their books, so it all sort of gets lumped together as spending, and all spending is not alike. some spending helps the economy grow, and i know at some point i knew we were going to get there, i guess we didn't get there, research and development which have been squeezed to smaller and smaller percentages of the federal budget. infrastructure's gone from 1.2% of gdp to .2% of gdp over the last 50 years as a percent of government spending. it's being squeezed down and down and down by things, entitlements are one, defense is another. i can't say what the right level of spending on defense, but i can say as an economics guy is defense spending is not investment, it doesn't add to product knit this country, it's something we have to do, but nobody should confuse defense spending with the way to grow an economy. that's not how you grow an economy. you do it for other reasons. so i just think it'd be also great as we get in all this

budget stuff, as you said, if we could be more clear-eyed in terms of what the impact of different kinds of spending on our long-term economic prospects as well as on simply creating some jobs in the short run. >> heidi, do you want to add anything to that? >> i think i'll leave -- >> heidi's not going near that issue. [laughter] >> i will put in an extra plug on the infrastructure front though because i think, you know, in addition -- we have some sizable challenges. the american society of civil engineers in their 2009 report card of u.s. infrastructure gave us a d and said that we need about $2.2 trillion of investment over the next five years starting from 2009. the numbers are staggering in terms of actually funding infrastructure. it's not just a challenge for the u.s., it's something that as you look around the world, um, with rising middle class, rising demands, rapid urbanization far

surpass anything that federal budgets and local budgets are going to be able to sport. support. so looking for creative ideas to do public/private partnerships or to be able to channel large pools of capital into infrastructure is going to be one of the primary challenges. >> okay. it's already a little bit past two, and i see lori looking at me with a certain hawkish intensity, so what i'm going to propose is everyone who is standing up, that's four people, ask your questionsful we'll take all four, and then i'll give steve and heidi a final chance to do a sort of smorgasbord answers. so, please, sir. >> okay, thank you. i'm james allen with the colorado springs world affairs council, colorado. my question has to do with health care as it relates to competitiveness in the world. i have a mystery to ask you first to consider and then a question. the mystery is that if you read

t.r. reid's book, "the healing of america," came out in 2010, i believe, he makes the observation that as a percent of gross domestic product our health care runs 17, 18 percent of gdp. if you look at it in the western european countries or canada, the health care cost to gdp in those countries is more like 7, 8, 9%. you could almost say there's a 10% difference in gdp between those two figures, or the comparison anyway. so the must ri, part of the question is why didn't the u.s. chamber or commerce or other business groups make more medicine about the fact that we're hurting ourselves from a competitive point of view to not have more efficient or more cost savings, more cost effective health care program in our country in and the more pertinent question in terms of where we go from here with obamacare coming down the pike, will we be or -- able under the new health care act to be able to foresee that by broadening

the base and having 44 million more people covered with health insurance, we will be able to bring down the cost so that we don't have 17% or 18% of our gdp going towards health care, so if you could comment on both of those, or the latter one because it's more current. thank you. >> excellent question, thank you. ma'am? >> if you could comment on regular rah story issues -- regulatory issues, it seems like to the regulatory framework has stayed the same where financial companies have changed dramatically. for example, insurance is regulated by the states, there was no state insurance department that ever figured out what was happening at aig. nobody was doing it at the federal level. these structures haven't changed. it seems like for competitiveness. this has been pretty much a disaster. could you comment in terms of regulatory environment and framework and the impact on competitiveness. >> okay, thank you. >> yes, my name is lisa with the

alaska world affairs council, and something that's of great importance to us and seems very clear is that there's a lot of global opportunity and challenges in the arctic, and, um, there's a lot of abundance of resources, and i use the word abundance on purpose, but we don't hear a lot of talk going on at a national level on plans and opportunities to take advantage of some of those things specifically with the eradication of a law of the sea and going into the arctic like our neighbors are doing. so if you could address that, that'd be great. >> okay, thank you, and -- >> karen wilson from western massachusetts, world affairs council of western massachusetts. i work for companies that are finding it very difficult to manufacture product competitively. in some cases the product landed from china is less than 50% of the cost of manufacturing here in the united states. i have an easy question for you. what about the manipulation of

the chinese currency? >> okay. okay. that is a wide-ranging set of excellent questions. [laughter] i'm going to let you, each of you choose which ones you want to answer but, please, answer at least one and try to sort of keep your replies to a couple of minutes. i'm going to start with steve, and i can't resist reminding those of you who haven't been following his -- [inaudible] very closely that not too long ago he wrote a column whose first sentence was we need death panels. >> i don't think this was the right group to tell that. [laughter] >> i'm just saying, i'm just saying -- >> i sense -- >> you wrote that. >> a certain drift in this group coming towards me that does not encompass death panels. >> they're still laughing. >> they're still laughing. i know heidi wants to talk about chinese currency manipulation. [laughter] so since you said death panels,

i'll start with that. health care we could spend another whole hour on, so let me just say one thing. the point the questioner made about europe spending a much lower percent of gdp is obviously correct, the gentleman back there, is obviously correct -- >> don't forget canada. >> and canada. [laughter] she's from canada, that's why she said that. and there's, um, a lot of reasons why, and there's certainly a lot of problems with our health care system. but since, and i was actually going to say this without using the word death panels. remember something that may not be -- you don't read in every story you read about why european health care is better than ours. and every european country that i know much about their health care system, they ration health care. they make decisions about how much health care a person, particularly the elderly, can have based on, and in britain it's a very formulaic calculation of, i call it quality of life per year or something like that. how many years you get for procedure and what quality of

life you get by doing it, and they say no. and we have not been willing to do that. it's a really tough moral issue, but right now we have a medicare system in which a quarter of what we spend goes to people in their last year of life, and we all know that a lot of that is not a great use of resources. and those are hard moral questions, i'm not here to tell you they're easy or please sam, but it is a -- please santa, but it is a nontrivial part of why we have that gap in gdp. the other one, and i'll do both these really quickly. on the regulatory framework, you're absolutely right, dodd-frank did a lot of good things, but it did almost nothing to reform our regulatory structure. of all the bank regulatory agencies, we got rid of one called the office of thrift supervision, and you still have the same patchwork of the d, d,dfdic and the fed and the insurance situation you described, and it's terrible. again, you have to point your ficker right here and -- finger

right here and say you have to deal with it. getting to that issue again is not going to happen, we're just going to have to live with it. and i'll just say one last word on the chinese currency. there was certainly a time when it was clear they manipulated their currency. i think congress would say it's a little bit less clear today for a variety of reasons. they certainly engage in a lot of trade practices that are not ideal, but it gets back to where we started this conversation. it's very hard to exert influence over people when you owe them a trillion dollars and when you have a trillion dollar deficit. and if we want to try to address the trade situation with china n many ways we need to get our own economic house in order and become stronger economically to have that conversation. so i don't know anything about the article -- >> [inaudible] the, on the chinese currency, you know, we do continue to support moves towards a market-based currency in china. it's something that's been very consistent, but just to

underscore what steve said, there are a lot of other issues out there that we, that we continue to focus on, protection of intellectual property rights, procurement issues. trying to insure a free, fair, open playing field for u.s. companies, um, and at the same time welcome chinese investment, um, into the united states. so it's really, we have a lot of other issues that are out there, certainly not off of the priority list. but there has been movement on the currency issue, and so we continue, like i aid, we continue to push for a market-based currency. on the issue, some of the earlier questions on competitiveness, um, the world economic forum, obviously, puts out its global competitiveness report, and i think the u.s. came in at number seven this past year, and the one thing that's notable is i think we came in around 33-ish for basic

institutional, um, infrastructure; education, regulatory issues. and that's something that is also reflected in what we hear at the state department when we talk to company that are looking at investing in the u.s. we have, um, obviously speaking from the purview of the state department, so there are, you know, limited things that we have, you know, direct influence on on a number of the different domestic competitiveness issues. but one that came up quite often and something that we've addressed significantly over the past couple of years is the issue of visas. because in order to have companies invest or to engage in trade, you need to have people going back and forth. and tourism is one of our, one of our greatest, um, you know, drivers of job growth. you have, um, you have people wanting to come here, you know, from all over the world, and we went from, i think in brazil we used to take 140 days to process

a visa for someone who wanted to come here and shop in new york, and now it's down to two. so it's something that we do have, um, we have worked very, very hard on certain elements of what were red flags on the competitiveness front, and we're going to be doing a lot more. >> okay. i think we're probably going to have to leave it there, and i just wanted to make one final remark myself which is maybe geared at the dallas/fort worth seniors. the question about optimism. this past hour has made me much more optimistic. when i moderate events, i always sort of try to check out the hall and the audience and see how people are feeling, and i have to say i am totally struck by the intensity of engagement today. it's lunchtime on friday, and i felt that every single person in the room was listening to every single word, and you asked fabulous questions. and i do think that, you know, national groups of intellectually-engaged citizens are something that i as a green